Canada Natural Gas Slides as Lower Temperatures Cut Fuel Demand

Canadian natural gas dropped on speculation that forecasts for moderate weather will reduce demand from power plants.

October gas in Alberta fell 2.7 percent as MDA EarthSat Weather in Gaithersburg, Maryland, predicted below-average temperatures for most of central Canada and the eastern U.S. on Sept. 19 through Sept. 28. Early October forecasts indicate weak northern U.S. heating demand, Tim Evans, a New York-based energy analyst at Citi Futures Perspective, said in a note today.

Alberta gas for October delivery dropped 6.5 cents to C$2.375 per gigajoule ($2.32 per million British thermal units) as of 12:45 p.m. New York time on NGX, a Canadian Internet market. Gas traded on the exchange is shipped to users in Canada and the U.S. and priced on TransCanada Corp. (TRP)’s Alberta system.

Natural gas for October delivery on the New York Mercantile Exchange dropped 7.7 cents, or 2.5 percent to $2.96 per million Btu at 12:49 p.m. The futures are down 0.8 percent this year.

“Peak demand is far off and the supply overhang remains onerous,” Mike Fitzpatrick, editor of the Energy OverView newsletter in New York, said in a note to clients. “Output is at or near records, keeping the market well supplied and promising bigger weekly storage builds and renewed concerns about capacity constraints.

The high in Calgary on Sept. 24 may be 49 degrees Fahrenheit (9 Celsius), 11 below normal, while Minneapolis may be 7 below normal at 68 degrees, according to AccuWeather Inc. in State College, Pennsylvania.

Cooling Demand

U.S. cooling demand may be 10 percent below normal over the next 7 days, data show from Weather Derivatives in Belton, Missouri. Electricity generators account for 36 percent of U.S. gas demand.

Gas inventories in the lower 48 states totaled 3.429 trillion cubic feet in the week ended Sept. 7, 9 percent above the five-year average for the period, the Energy Department said yesterday. Stockpiles may climb to a record 3.95 trillion cubic feet by the end of October, compared with total storage capacity of 4.239 trillion cubic feet as of April, department data show.

Volume on TransCanada’s Alberta system, which collects the output of most of the nation’s gas wells, was 15.5 billion cubic feet at 11:30 a.m. New York time, compared with the target of 16.2 billion.

Gas was flowing at a daily rate of 1.85 billion cubic feet at Empress, Alberta, where the fuel is transferred to TransCanada’s main Line.

Gas Flows

At McNeil, Saskatchewan, where gas is transferred to the Northern Border Pipeline for shipment to the Chicago area, the daily flow rate was 1.97 billion cubic feet.

Available capacity on TransCanada’s British Columbia system at Kingsgate was 182 million cubic feet. The system was forecast to carry 1.81 billion cubic feet today. Estimated capacity was 2.02 billion.

The volume on Spectra Energy’s British Columbia system, which gathers the fuel in northeastern British Columbia for delivery to Vancouver and the Pacific Northwest, totaled 2.69 billion cubic feet at 11:35 a.m.

To contact the reporter on this story: Naureen S. Malik in New York at Nmalik28@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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